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The Options Strategist
February 21, 2013 10:55 AM
GANN THEORY WITH JEFF COOPER
Cold turkey has got me on the run
Cold Turkey (John Lennon)
The market usually, not always, gives a graceful exit. Yesterday’s report,
The Trouble With Creeps
, noted that “the problem with creeping rallies without corrections is that the first day down by a big institutional seller often times finds ‘everybody’ selling and things can get out of control.”
Yesterday, that big institutional seller showed up. Yesterday, things got out of control as the largest sell-off of the year played out RIGHT OFF THE HIGH.
What changed between Tuesday when the
kissed a date with destiny at 931/932 and Wednesday?
I defy you to tell me what moved the market to react with such violence on Whipsaw Wednesday?
While the culprit may look like the Fed and its convenient to lay the blame at their doorstep, the market was under pressure on Tuesday well before Fed Hawks were spotted with their talons flying away with the Punchbowl.
A 10 min S&P for Wednesday shows the market was selling off before any Fed comments.
sent an alert
showing an hourly SPY noting that a stab with authority back below the recent breakout pivot of 152.50 would probably elicit downside acceleration. The S&P/SPY tried to hold this pivot, but when the FOMC Bottoming Tail was broken (following hawkish Fed comments), the sell off accelerated: the reversal back below the large 10 min outside up FOMC reversal put the nail in the day. Offers were heavy into the bell.
The market usually (not always) offers a graceful exit. The T Rex in the ointment is that runaway moves can make an exception to this principle. Yesterday’s report concluded by saying that “buying every dip in a runaway move is the proper stance, but when this behavior changes it can be abrupt and violent.”
Is it possible that there are big institutions out there who subscribe to Money Math and the Principle of Squares as borne out by the Square of 9 Wheel?
Is it possible that when time is up trend changes?
It looks like time hit a brick wall on Wednesday.
Is it possible that Mr. Time & Mr. Price met at the Turning Point Café yesterday?
Let’s recap just a few of the factors that pointed to a major top in this time frame and price zone.
Recently in this space we flagged an interesting time relationship.
From the 10/10/1974 bear market low to the 8/24/87 pre-crash high = 4701 days.
From the big 3/24/2000 Bubble Top to 2/4/13 also equals 4701 days.
I went on to say that because it’s such a big cycle, the entire month of February could mark the turn.
It will be interesting to see if we get a Topping Tail on the S&P this week (a new high with a close for the week at/near the lows).
As you recall, I went on to note that this precise 4701 calendar day count, which ties to a 13 year cycle, is only one of many 13 year cycles that shows up.
There is also a 13 year cycle from the major 1990 low to the 2003 low.
From the major low in 1994 which defined the kickoff for the vertical rise into March 2000, a 13 year cycle ties to the historic 2007 top.
The 13th hour may also considered to be the 1st, just like the 25th hour. Recently we did an article called
about the 25 year cycle which is an harmonic of the 13 year cycle.
If we represent 13 as a wheel with 12 rays (like a Zodiac), we have 12 units around a center.
13 represents the Seal of Solomon (considered the wisest man who ever lived) which is two interlocking triangles ENCIRCLED built upon an ascending set of 13 “wheels” cycles.
This is essentially a representation of the Wheel of Time & Price or Time & Price Calculator.
Suffice to say that the number 13 is hidden in many cycles, religions and countries.
The U.S. originated with 13 colonies.
There was Christ and his twelve apostles.
From July 1776 every 13 year cycle was pivotal in the U.S.
For example 13 years after 1776, George Washington was inaugurated the first president of the U.S.
If 13 is important, then the key 13 X 13 ‘square’ or 169 years forward should be very important.
169 years from July 1776 was July 1945, just one month from the end of WW2. It was also one month from the first atomic bomb being dropped.
The 12th hit of the 13 year cycle was July 1932 which marked the price bottom of the Great Depression.
So, we are one month from the 13th anniversary of the Great Secular Bull market top on March 24th, 2000. The S&P high at that top was 1552.
Yesterday we noted that February 20th was 1552 days from the November 21st, 2008 crash low.
So there is a potentially big vibration playing out here as often times an important price will point to a future time and an important time will “show up” in the price at an important top or bottom.
If you take the date of the major low of June 4th S&P low at 1266 to Tuesday’s S&P high at 1531, you get 265 points.
From June 4th, 2012 to our Tuesday high of February 19th is 260 days with the 265 day being Saturday.
My presumption has been that this week and the month of February would be a key turning point.
Will this get a weekly Topping Tail, a reversal week on the S&P here?
Will be get a possible monthly Topping Tail for February?
Will we see a barrage of Buying Climaxes on individual names into the weekend?
Above we mentioned the key RUT projection of 931/932. This is precisely 6 revs of 360 degrees (or 6 full squares) up from the 343 RUT low in March ’09.
Click to enlarge
Back in 2007 when the S&P had advanced precisely 6 revs up from a 768 low to 1576, it dawned on me that this was a big deal. Why?
W.D. Gann emphasized the importance of square root methodology and squares in determining trends and highs and lows. It occurred to me that a true square is a cube. I don’t ever recall reading where W.D. Gann ever revealed or pointed to this. However, a cube is a 6 sided square consisting of 6 hard right angles of 90 degrees each. In my course Unlocking Profits With The New Swing Method, I walk through each major turn in the S&P from 1941 through 2005 and was stunned at the significant turns 540 degrees in price and in time.
In 2007, I reckoned that a grand cube may be perfected with 6 sides of 360 degrees. This was exactly what played out in the S&P from 2002 to 2007.
On Tuesday, the RUT kissed 931/932. Tuesday’s action was completely engulfed or offset by yesterday’s reversal which left bearish Train Tracks and the largest one day decline in 2013.
The market is talking. The market is respecting 931 in a big way. When the market talks, it pays to listen.
. Now we must watch to see the nature of the first bounce from wherever this reaction ends. Will it be feeble or sharp?
The market plays out in decrements of 90 degrees in price and time. While I know everyone wants to play for the big enchilada up or down, and that is intellectually enticing, we must take the market a week at a time. While we may have a roadmap, we must do the backseat driving and let Mr. Market do the talking and let him do the driving.
So, 90 degrees down in price from the 1531 high gives 1492. This also ties to 1489, which is important because 1489 is an important 540 degrees UP from the major 1266 low.
So now we have two levels of interest that converge which SHOULD offer support---especially the first time down.
A 180 degree decline from this weeks 1531 high equates with 1454. If 1489-1492 is snapped with authority, the presumption is the S&P will extend to 1454 which ties to a test of the prior tops in September.
Since the anniversary of the ’09 low is coming up on March 6th, it is interesting that March 6th, 2013 is 1461 days from March 6th, 2009.
This creates another significant convergence for support if the market gives a 2 to 3 week correction into this anniversary.
I know the vast majority of players give short shrift to the idea of anniversary dates, but March has seen a major turn for nearly every year since 2000.
In addition, it is worth noting that the major 1974 bear market low, the major 2002 low and the historic 2007 top all occurred on October 10th/11th.
There is nothing unusual about a 2 to 3 week correction in a roaring bull market. What is unusual is that the vast majority of market participants believe any correction will be shallow when it is not unusual, at least historically, for a couple of 10% corrections to play out annually.
Every bear market in history has stockholders hanging on as prices move lower. This is the effect of a powerful impulse such as the explosive move this year and the continued advance since ’09 when every steep selloff was met with skepticism but is now looked forward to as an opportunity.
Did 2009 mark a generational bottom and the trough of a 100 year storm?
Or, was that a shot over the bow with the vast majority of market participants and investors finally convinced that lightning can’t strike twice.
I’m not sure, but if lighting can strike the Vatican the day the Pope resigns for the first time in 600 years and with an asteroid hitting the earth, perhaps we do need to think the unthinkable.
I do know this, that one brilliant market observer, Robert Prechter, is looking for a 100 year financial storm, if not a 300 year storm and that if that he is going to be correct, as he was as the market guru back when the bull began in the early ‘80’s, then the market will do exactly what it has to do discredit his warnings.
“Don’t think there are no beasts just because the forest is silent.” Paulo Coelho
. After yesterday’s momentum, the market may find a first hour low and let the dust settle for a day or two. Then another stab down. The behavior from the first turn down of the 3 Day Chart (on 3 consecutive lower lows) will be an important tell. I want to remain short under 1510 and flat above 1514 and would not be interested in the long side unless 1520 is recaptured.
In theory, if 1492ish holds, we could still see a spike to 1550ish but time is running out I think and it’s a 50/50 bet with a chance that waiting for an all time new high in the S&P and DJIA may be ‘a hook’ that keeps the moths coming back to the flame.
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